10 States With the Highest Average Income Tax Refund

Americans tend to have mixed feelings about tax refunds. On one hand, with a national average refund of $2,800 in 2012, the financial windfall is a boon for budgets ravaged by the holiday shopping season; on the other, a refund is just Uncle Sam paying back the principal on an interest-free loan.

While the current refund system may be annoying and a little unjust, receiving the money in a lump sum does have its benefits. For example, it can be difficult to set aside small portions of income to save for retirement or to pay down debt. It can be much easier to part with a onetime payday, such as a refund, in order to make progress on these goals. A survey conducted by TurboTax suggests that people do just that. According to the survey, 29 percent of people who receive a refund in 2012 planned to put it into a retirement account, and 24 percent said they would use it to pay down debts.

Whatever you use your refund for and however you feel about extending an interest-free loan to Uncle Sam, it’s worth knowing what the landscape looks like. Here are the 10 states with the highest average income tax refund in the United States.